INFORMATION

The management of Mastiff Enterprises has a choice between two projects viz. Project Cos and Project Tan, each of

which requires an initial investment of R2 500 000. The following information is presented to you:

	PROJECT COS	PROJECT TAN
	Net Profit	Net Profit
Year	R	R
1	130 000	80 000
2	130 000	180 000
3	130 000	120 000
4	130 000	220 000
5	130 000	50 000

A scrap value of R100 000 is expected for Project Tan only. The required rate of return is 15%. Depreciation is calculated using the straight-line method. Use the information provided above to calculate the following. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 5.1 Payback Period of Project Tan (expressed in years, months and days). (3 marks) 5.2 Net Present Value of Project Tan. (4 marks) 5.3 Accounting Rate of Return on average investment of Project Tan (expressed to two decimal places). (4 marks) 5.4 Benefit Cost Ratio of Project Cos (expressed to three decimal places). (4 marks) 5.5 Internal Rate of Return of Project Cos (expressed to two decimal places) USING INTERPOLATION. (5 marks)